Alternative financing to hit $34 billion mark in 2015
Could surpass venture capital and angel investing
Alternative financing emerged following the 2008 global financial crisis. Two of these alternative financing mechanisms are peer-to-peer or P2P lending and crowdfunding where funds are raised online. The growth of alternative financing has been consistent since its introduction, raising $2.7 billion in 2012 across the globe by funding over one million online campaigns using all types of crowdfunding. Since then, amounts raised through alternative finance platforms each year have consistently increased by more than 100 per cent annually, reaching $6.4 billion in 2013 and $16 billion in 2014. Following this growth trend, alternative financing platforms could likely raise up to $34 billion globally by the close of 2015.
Projected growth
In 2013, amounts raised using alternative finance platforms exceeded the expected $5.1 billion mark by about $1.3 billion. A study by the World Bank in the same year projected that amounts raised via crowdfunding globally in developed economies would range between $90 billion and $96 billion over the next consecutive 25 years. This amount is 1.8 times the current size of the venture capital industry globally.
Growth in alternative finance has been driven partly by the entry of established businesses into the crowdfunding and peer lending space. At first, alternative finance platforms featured nascent firms that wanted to raise capital to fund their seed stages when it became difficult to obtain capital from conventional sources. With time, the industry took a leap and is now capturing the attention of well established businesses largely due to the cost-saving opportunities it presents and the speed at which fundraising targets are met.
